Medicare patients alone admitted to observation status—now roughly 1.8 million annually. Yet even for clinicians, misunderstandings about observation status abound—as demonstrated by the complexity of frequently asked questions offered by the American College of Emergency Physicians (ACEP). The confusion is only intensified for patients, few of whom are familiar with the difference between an inpatient admission and an admission for observation.
Observation status typically means a patient is not sick enough to be admitted as an inpatient, but the attending physician would like to monitor his or her condition closely for a period of time to ensure it is stable or improving. Observation care is intended to better manage costs and improve care efficiencies while reducing inappropriate inpatient admissions.
Much of the confusion, however, stems from the fact that "observation" it is simply a patient status rather than a physical location. It can occur while a patient is in a traditional ED bed, inpatient bed, or special observation unit bed, and it may include monitoring, diagnostic testing, therapy or even surgical procedures to determine whether the patient requires further treatment or can be discharged. In other words, being assigned to a hospital bed does not automatically equate to inpatient status—and patients seldom understand the bottom-line implications of this important distinction.
Complicated challenges
Observation admissions are financially challenging for hospitals and patients alike. That is because specific Medicare payment policies dictate that short-stay observation status must be billed under Part B coverage for outpatient services, which typically is reimbursed by the payer at a lower rate than Part A inpatient coverage. Those patients covered by private insurance may also have larger co-pays and co-insurance amounts.
Whether they are covered by Medicare or private insurance, many patients assume any stay in the hospital is an inpatient admission and, as such, carries a higher level of benefits coverage. Therefore, when the hospital bill arrives and indicates only partial coverage for outpatient charges, they are surprised with higher-than-expected out-of-pocket costs.
Consequently, hospitals often receive complaints about unexpected charges and this often extends to lower scores on their patient satisfaction surveys. Even patients who had a positive clinical experience in the ED, for instance, might change their minds about the encounter when the bills arrive. If a patient does not agree with the charges, the hospital also might have difficulty collecting any outstanding balance.
The dilemma is likely to grow as patients newly insured through the Medicaid expansion program begin to visit EDs, and the application of the "Two-Midnight Rule" limits discretion about which hospital stays may be classified under inpatient status. In fact, it is an issue that has begun to catch the attention of risk managers and patient experience officers. To address the complicated observation situation and maintain high patient satisfaction scores, some are developing more robust strategies to both lessen the need for observation admissions, as well as better educate patients about what "observation" really means.
Helping patients understand
By now, most hospitals well understand that patient satisfaction is not merely a "nice to have" component of care. As the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) has taken hold, so has its effect on reimbursement. What many hospitals are finding is a link between observation admissions and lower patient satisfaction scores—which in turn has the potential to negatively affect reimbursement.
To alleviate this multi-layered concern, hospitals can adopt the following two-pronged communications approach aimed at both lowering the need for observation care, as well as enhancing patient understanding of observation when it is necessary:
1. Mitigate the need for observation admissions. At the same time hospitals are being pressured to lower high-cost inpatient admissions, physicians need to make sure patients are accurately diagnosed and treated. Thus, when it is not immediately clear whether a patient can be discharged safely, physicians appropriately order observation. Generally overlooked, however, are ways to actively monitor patients after discharge to maintain patient contact, but without the need for an observation admission.
One two-hospital system in Illinois, for example, has managed to cut its observation admissions in half by adopting an automated patient contact system to follow up with ED patients the day after discharge. Outreach is done via patient-preferred text message, email or phone call. Patients who indicate they feel worse than they did when in the ED are promptly contacted by the ED charge nurse for instruction and assistance. In a hospital system with 90,000 annual ED visits, this level of timely and personal contact gives ED physicians more confidence discharging those "on-the-bubble" patients who previously might have been admitted to observation.
The ability to document a patient's response to items such as how they are feeling, whether they understand their discharge instructions, or if they are having any issues with medications or primary care appointments offers an additional benefit to this technology-enabled discharge follow-up approach. That can be beneficial in an environment in which patient satisfaction is continually measured.
2. Educate patients about observation status. When a physician decides to admit a patient to observation, that patient must have a clear understanding of what is going to happen—from both clinical and billing perspectives. Very often, dissatisfaction arises simply because there is a disconnect between what the patient expects and what actually occurs. A straightforward consent process—structured much like a surgical consent process—can help patients understand what observation is, why it is recommended, and how its classification as an outpatient service may matter to them from an insurance perspective.
Regardless of whether it is printed or read on a computer, a consent for observation admission should be short (less than two pages), be written at an 8th grade or lower reading level, and explain important points using specific examples. The goal is to clearly illustrate that the benefit of observation is to ensure patients get well, as well as detail the potential risks and drawbacks—including that they may have a higher than expected financial responsibility. As with any consent process, alternatives such as leaving the hospital against medical advice (AMA) should also be included in the documentation and discussed.
Many forward-thinking hospitals have adopted electronic informed consent solutions that facilitate the documentation of patient consent for treatments and procedures. Those same tools not only save signed forms instantly to the patient's electronic medical record, those easy-to-understand forms and education materials may be printed or emailed to patients—providing them with a transcript and useful reminder of the informed choices they have made. Application of this technology is an ideal strategy for facilitating the shared decision-making process for observation admission.
Improving patient care and satisfaction
Observation services have long been a source of confusion for patients and providers alike. With hospitals and EDs already feeling the impact of changing reimbursement methodologies, however, it is becoming increasingly important to develop strategies that bring clarity to observation status. Hospitals can improve both patient satisfaction and their bottom lines by taking a few simple, technology-enabled steps to reduce the need for observations and to level-set patient expectations about observation care.
Timothy Kelly is a director of Standard Register Healthcare, a leader in providing services and technology-enabled solutions to enhance patient engagement. His interests include automating critical patient communication processes, including well-being checks and informed consent.
1 Report to the Congress - Medicare Payment Policy. Washington DC: Medicare Payment Advisory Commission; March 2014: 57. http://www.medpac.gov/documents/reports/mar14_entirereport.pdf